DoD Requests Navistar International Corp (NYSE:NAV) For Documents Related To Suspension Systems Sales

Navistar International Corp (NYSE:NAV) has received a Department of Defense subpoena asking it to surrender documents related to the sale of certain suspension systems that the company built for military vehicles in the past years.

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The DoD is specifically interested in the details of the sales of suspension systems the company build for the U.S. military in 2009 and 2010. Navistar has said that it is fully cooperating with the DoD and is providing it with the information requested.

Some facts are unknown

Though it is well-understood that the DoD is pursuing details of suspensions sold to the government between 2009 and 2010, not everything is known about the subpoena. For instance, it is not clear whether the documents the DoD is seeking relate to suspensions built for trucks used by the U.S. troops in Iraq and Afghanistan. The trucks for the U.S. troops were built to withstand ambush and mine attacks.

However, Navistar would later modify the suspensions that were designed for the service in Iraq so as to suit them for off-road performance in Afghanistan terrains. Some 8,700 trucks were built starting in 2007 for the services in Iraq and Afghanistan.

$256 million investment

The DoD’s subpoena comes on the heels of Navistar’s announcement that Volkswagen AG (OTCMKTS:VLKAY) was taking a minority stake in its equity. Volkswagen has committed to invest $256 million in Navistar’s stock, which will give it a 17% equity ownership in the company.

As part of the deal, Navistar and Volkswagen will work to jointly develop trucks and engines for sale in the North American market.

The deal with Volkswagen also comes at a time when Navistar is also struggling with soft demand for trucks. NAV’s CEO Troy Clarke has already warned of soft sales of heavy trucks in 2017 compared to 2016. That comes at a time when sales of heavy-truck in 2016 are expected to decline by nearly one-third from 2015 sales in terms of volume.

Navistar reported a 24% pullback in its truck sales in F3Q2016. With that, the company logged EPS loss of $0.42, wider than EPS loss of $0.34 in a similar quarter last year. Revenue for the quarter fell 18% YoY to $2.09 billion, missing the consensus estimate of $2.18 billion. Analysts were looking for EPS profit of $0.14 for the quarter.

Troy Clarke, CEO of Navistar International said “The [third] quarter [had] a little less volume than we anticipated.”

“We expect a stronger fourth quarter than third quarter,” added Clarke.

Navistar International closed at $19.12 up 0.53% from its previous close.

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